Lessons from the Pictet family and model

I joined a small Asian media party who visited the headquarters of Pictet Group in Geneva, Switzerland, in late June / early July. The group, which is active in wealth management, asset management, alternative investments and asset services, is Switzerland’s second-largest financial institution, behind UBS, and Europe’s largest privately held financial institution.

The visit was enlightening – I gained valuable insights from the group’s various leaders on the global investment and wealth management landscape. 

However, what left an indelible mark is that a ninth generation of the Pictets continues to be at the top management echelon of the 220-year-old group – a business the family first became associated with in 1841.

Among the seven top partners are cousins Marc Pictet and François Pictet, with the former being the senior partner.

François Pictet was frank in admitting there is pressure in carrying the family name, noting there is the responsibility of not undoing the work done by eight generations of managing partners before.

Many wealthy people in Singapore view property investment as a key element of wealth preservation and building a financial legacy. Think of passing down freehold or 999-year leasehold homes, shophouses and office buildings, which appreciate in value, from generation to generation without incurring estate duty.

As Singapore turned 60, some storied families behind leading property businesses here that are around the nation’s age or older are transitioning or will be doing so shortly from second generation to third generation leadership.

For example, a third generation has come to the fore at property empires that were built by titans in the early days of independent Singapore, such as the late Ng Teng Fong and the late Kwek Hong Png, who founded Far East Organization and Hong Leong Group, respectively.

Siblings Terence and Emilia Teo are third-generation property business leaders, whose grandfather and granduncle established Tong Eng Group, which was active in building landbank in Singapore’s suburbs in the 1950s.

I think leading Singaporean families owning and managing property empires who aspire to pass said businesses through multiple generations can learn useful lessons from the Pictet family.

Private ownership

First, being a privately-owned business might help. Pictet Group’s leaders see that private ownership allows them to take a long-term view and not be subject to having to act in ways to please external shareholders.

With property development, projects may have long gestation periods and produce lumpy earnings, which are unfavourable characteristics for a listed business. 

Indeed, property development and investment companies are generally poorly valued on the domestic bourse. And many examples exist of successful privatisations of local-listed property groups.

Moreover, today, a privately-held property group with good credit standing and track record can easily access various financing sources at competitive rates as well as collaborate with partners to undertake projects.

Privatisation of property groups

Selected examples

Spread the wealth

Second, spread ownership of a business among key leaders. Pictet Group is owned by seven managing partners and other members of senior management.

Spreading the ownership of a business among its key leaders can help incentivise management to act in the interests of the company and take a long-term view.

Sure, a family owning a business may want to keep economic interest largely for itself so it can grow wealthy. However, might such a model impede the attraction and retention of top talent who are non-family members?

Many property businesses here have grown vastly more complex over the years, with exposure today to multiple property asset types, diverse geographies, sophisticated financing structures and so forth.

With the growing complexity of businesses and importance of product differentiation in a more mature Singapore property market, family-owned property businesses cannot afford to be uncompetitive in fighting for talent. After all, any slight edge in creativity or innovation might easily add millions of dollars to an investment property’s value or a property development project’s profit.

Secure buy-in

Third, have family members assume corporate leadership positions subject to the approval of other business leaders who are non-family members.

At Pictet Group, the appointment of a Pictet family member to be a managing partner is subject to voting only by managing partners who are not family members.

In short, while having the Pictet name lends cache, buy-in from non Pictet family members is needed for Pictet family members to keep alive the tradition of the family’s involvement in top management. 

As luring and keeping good talent impacts a business’ performance, family-owned groups here should embrace meritocracy and avoid situations where having the family name confers undue advantage in being fast-tracked into leadership.

Leadership renewal

Fourth, establish procedures to ensure smooth leadership renewal in a business.

At Pictet Group, managing partners have to adhere to the retirement age. Upon retirement, a partner exits his role in helping manage the business and sells his stake at book value.

Having rules on retirement that apply to family and non-family members in corporate leadership can help remove drama and intrigue that may surround elderly business leaders who hang on to their positions, possibly to the detriment of a business.

While families feuding over corporate succession may make exciting news, they can be hugely unproductive for a business.

On the other hand, orderly leadership renewal in a business allows the management of the said business to be laser focused on executing on projects and investments.

Given the enduring need for good physical spaces for living, working and playing, property groups can look forward to a bright future, especially in cities where the economy, household income and population are growing.

In the capital-intensive property business, large family-owned businesses with strong track records occupy a good position.

Nonetheless, ensuring a property empire lasts well beyond three generations in a rapidly changing world is challenging, especially as competition in property development and investment among disparate players in Singapore can be intense.

The Pictet family is rare in being involved in a business for nine generations and, for that matter, a business which has grown substantially over time.

Wealthy property-linked families here who seek for their empires to thrive over multiple generations should apply lessons from the Pictet family.

Ultimately, storied Singapore property-linked families will be wise to bank on having talent from among family members work harmoniously alongside external talent to build enduring businesses.